India running out of steam at on-going WTO negotiations

India seems to be buckling under pressure at the on-going trade negotiations of the World Trade Organisation.

Developed countries are pushing it to accept a pact, to be signed in Bali early next month, that falls short of its expectations in two major areas of concern — food security and customs cooperation.

Developed country members, including the EU and the US, are not accepting India’s proposal that protection against penalties for breaching farm subsidy limits (called peace clause) for meeting food security commitments be extended till the time a solution is found to the problem, a Government official told Business Line.

They in fact are firm on their stance that such subsidies need to be checked if it affects international food prices and global food security.

The WTO Director-General had proposed that developing countries be given a four-year peace clause after which the situation would be reviewed depending on how it played out. While India is agreeable to accepting the four-year reprieve, it is not happy with the terms of review.

To make matters worse, a group of developing countries including Pakistan, Thailand, Uruguay, Paraguay, Mexico and Ecuador, on Wednesday, demanded that the duration of the peace clause be reduced to two years and the items covered by it just two.

These developing countries are mostly farm produce exporters or buy from the international markets. They are also close to the US and toe its line on many issues.

India and the G-33 group of developing countries have rejected the proposal made by these countries.

New Delhi wants a permanent solution to the way farm subsidies for grain procurement and food security are calculated, as implementation of its new Food Security programme could lead to breach of permitted levels.

In the area of customs cooperation, which is important for India to check under- and over-invoicing of goods to prevent money laundering, developed countries have introduced so many riders in the proposed pact that it could make compulsory sharing of information very difficult.

“We are still working on all issues that would feature in Bali and are hoping to get a better deal. The negotiations are not closed till the entire package of issues is agreed upon,” another official said.

Trade Ministers from WTO member countries will be in Bali, Indonesia, between December 3 and 6 trying to work out a pact on a handful of issues including agriculture, trade facilitation (seamless movement of goods across borders), and a package for least developed countries. A limited pact could give a boost to WTO’s languishing Doha Round of trade talks launched in November 2001.

Farm subsidies and trade facilitation are the two important areas where agreement could be possible in Bali.

The WTO’s Agreement on Agriculture lays down that the so called trade distorting subsidies be restricted to 10 per cent of total farm production. Since the base-line fixed for calculating these subsidies is 1986-87, India and the G-33 group of developing countries have argued that the present subsidy calculations are inflated. For instance, if the difference between the MSP paid by India for wheat today is compared against low international wheat prices prevailing in 1986-87, the resulting subsidy would be much steeper than it would be if calculated against existing international prices.

India wants a change in the AoA to factor in inflation while calculating subsidies and also excluding minimum support prices from the category of trade distorting subsidies.

In the area of customs cooperation, developed countries have laid down that members cannot compulsorily demand information from a trading partner if it goes against domestic laws and regulations, proves to be an administrative burden and affects commercial interests of a company.

“This takes away all the teeth from the proposed agreement as it would be very difficult to take out information from an non-cooperating company,” the official said.

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